Supply Chain Strategy and Management

Supply Chain Strategy and Management

3/28/12Latest Blog Post

Excerpt from the Book review of David Simchi-Levi’s Operations Rules in Interfaces by Luk Van Wasssenhove INSEAD, Technology and Operations Management, This is an excellent book! The reader who is truly interested in operations management should consider buying it. It is insightful, deep but not technical, to the point, and illustrated with many interesting examples. I believe it […]

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The new era in Silicon Valley centers on artificial intelligence and robots, a transformation that many believe will have a payoff on the scale of the personal computing industry or the commercial internet, two previous generations that spread computing globally. Computers have begun to speak, listen and see, as well as sprout legs, wings and wheels to move unfettered in the world. The shift was evident in a Lowe’s home improvement store here this month, when a prototype inventory checker developed by Bossa Nova Robotics silently glided through the aisles using computer vision to automatically perform a task that humans have done manually for centuries.

TradeLens is a neutral industry platform that uses blockchain technology to promote a more predictable and secure exchange of information between major industry players. That capability can break information silos, streamline business processes, and maximize asset utilization. Parties that stand to benefit from the approach include shippers, shipping lines, freight forwarders, port and terminal operators, and inland transportation and customs authorities. Those organizations can use the secure platform to exchange real-time information such as shipping data and shipping documents, including internet of things (IoT) and sensor data ranging from temperature control to container weight.

Apple’s retail stores collect cash from customers quickly, it is ruthless on keeping inventory low, and it takes forever to pay suppliers. In the process, Apple’s operations are extremely effective cash generators. This is no coincidence. It is the result of the canny supply chain that Tim Cook built. In effect, Apple has largely been financed on the backs of its suppliers, who are willing to hold their inventory and wait more than 100 days to get paid, just for the pleasure of doing business with Apple.

Fast-fashion giant Zara is equipping its stores to also ship online purchases, betting that the move will boost sales of full-priced items that can be delivered to customers more quickly than from a warehouse. The rollout encompasses around 2,000 stores in 48 countries, including the U.S., making it one of the largest-scale attempts by an apparel company to repurpose downtown shops to help fulfill online orders.

Your suspicions are correct: The biggest companies in every field are pulling away from their peers faster than ever, sucking up the lion’s share of revenue, profits and productivity gains. New data suggests that the secret of the success of the Amazons, Googles and Facebook s of the world—not to mention the Walmart s, CVSes and UPSes before them—is how much they invest in their own technology.

A key part of a buyer’s job is to anticipate what customers will want using a well-honed sense of where fashion trends are headed. In the small but growing precincts of the industry where high-powered algorithms roam free, however, it is the machine — and not the buyer’s gut — that often anticipates what customers will want.

Scrambling to turn out its first mass-market electric car, the automaker set up multiple assembly lines and is changing production processes on the fly. Robots can do only so much: Tesla aims to hire about 400 employees a week to help accelerate Model 3 production.

Home Depot plans to add an incredible 170 distribution new facilities across the US, so that it can reach 90% of the population now in just one day or even less. The new sites will include dozens of direct fulfillment centers for next-day or same-day delivery of fast moving SKUs, as well as 100 local hubs where larger items like patio furniture and appliances will be consolidated for direct shipment to customers.

A circular supply chain, as IKEA describes it, is one where every product is designed and produced with its next-use in mind. With less than 30% of the retailer’s climate footprint stemming from Tier 1 and its own operations, the retailer looks at the way it sources and designs products.

When the supply chain goes awry, bottlenecks may develop that not only make a business operate less efficiently but can also wreak havoc on products that are particularly time-sensitive. That’s what happened at KFC, which pared back its logistics network to cut expenses and ended up leaving about two-thirds of its 900 outlets across the U.K. without chicken for several days.

What is blockchain? It’s essentially a secure database, or ledger, spread across multiple computers. Everybody has the same record of all transactions, so tampering with one instance of it is pointless. Already, 1.1 million items sold or on sale at Walmart are on a blockchain—including chicken and almond milk—helping the company trace their journey from manufacturer to store shelf. Global shipping giant Maersk uses the same technology from IBM to track shipping containers, making it faster and easier to transfer them and get them through customs.

In Kellogg’s old distribution model (the DSD model), Kellogg would deliver snacks to its own warehouses, and from there distributors would deliver the snacks to retail stores. In the new warehouse model, Kellogg will deliver snacks directly to retailer warehouses, which will then deliver to stores or directly to consumers. The warehouse model allows Kellogg to more accurately gauge consumer demand and stock inventory accordingly.

Insufficient rains in India have resulted in several years of poor harvests of chickpeas, the main ingredient in hummus. The country, by far the world’s largest producer of chickpeas, mostly grows the legume for domestic consumption. But worse-than-expected harvests mean that it has had to buy more chickpeas from growers elsewhere, putting pressure on supplies worldwide and driving up prices. Those limited supplies of chickpeas have combined with rising demand for hummus in Britain to send prices higher. Average prices for the dish at supermarket are 12 percent higher than a year ago. That is significantly more than grocery price inflation of 3.6 percent, and overall inflation of 2.7 percent. It is the latest example of weather leading to poor harvests in one part of the world, and resulting in shortfalls and price rises at supermarkets far away.

Just-in-time may be losing just a bit of its luster. Recent scandals at a range of Japanese manufacturers and suppliers have left cracks in the country’s reputation for flawless manufacturing and efficiency, threatening to accelerate an erosion of Japan’s global market share for factory-made goods and undermining management principles that have guided businesses and supply chains world-wide.